Global Governance and “New Governance Theory”: Lessons ...

Global Governance 20 (2014), 5?17

THE GLOBAL FORUM

Global Governance and "New Governance Theory": Lessons from

Business and Human Rights

John Gerard Ruggie

ON 16 JUNE 2011, THE UN HUMAN RIGHTS COUNCIL UNANIMOUSLY ENDORSED the Guiding Principles on Business and Human Rights that I developed over the course of the previous six years in my role as the Secretary-General's special representative for business and human rights.1 The journey involved nearly fifty international consultations on five continents, numerous site visits to individual firms and local communities, extensive research, and pilot projects to road test key proposals. For the council and its institutional predecessor, the Commission on Human Rights, the endorsement was unprecedented. It was the first time that the UN adopted a set of standards on the subject of business and human rights; and it remains the only time the commission or council endorsed a normative text on any subject that governments did not negotiate themselves. Moreover, the uptake of the Guiding Principles (GPs) by other standard-setting bodies, national and international, has been swift and widespread, as has their use as a policy template by companies and business associations as well as an advocacy tool by nongovernmental organizations (NGOs) and workers' organizations.2

I have told the story of how this came about in my book, Just Business: Multinational Corporations and Human Rights.3 Here, I want to relate it to recent conceptual debates in the study of global governance, which I loosely term "new governance theory."4 Governance, at whatever level of social organization it occurs, refers to the systems of authoritative norms, rules, institutions, and practices by means of which any collectivity, from the local to the global, manages its common affairs. Global governance is generally defined as an instance of governance in the absence of government. There is no government at the global level. But there is governance, of variable effectiveness. However, the recent literature has identified a secular trend: an already weak system of global governance apparently becoming more so. Global governance architectures, legal and institutional, are said to be fragmenting.5 Traditional forms of international legalization and negotiation through universal consensus-based institutions are stagnating.6 Regime com-

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plexes that often embody divergent norms dominate previously coherent rule systems.7 The decline of the West and the rise of the rest add to the centrifugal pull, not only in material terms but also in animating visions.8 There may be individual instances of network governance, multilevel governance, private governance, multistakeholder initiatives, and even experimentalist governance.9 But the ideal solution of comprehensive and integrated regimes, Robert O. Keohane and David G. Victor contend in the context of climate change, is increasingly unattainable and they urge "making the best of this situation."10 Few would argue that the picture is much different in other policy domains characterized by substantial problem diversity, conflicting interests, and uncertainty regarding risks, gains, and losses--which, of course, describes many of the most serious problems on the global governance agenda.

And yet as has been said about Wagner's music, the situation may not be as bad as it sounds. I undertook the strategic construction of the Guiding Principles aware of the (powerful) systemic constraints and (modest) opportunities identified in this literature, to which I have contributed on occasion.11 Indeed, in my UN reports, I described business and human rights as a microcosm of a larger crisis in contemporary governance: the widening gaps between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences. The GPs are far from constituting a comprehensive and integrated global regime. But they do demonstrate that it is possible to achieve a significant degree of convergence of norms, policies, and practices even in a highly controversial issue area. Thus, there may be value in recapitulating some of the GPs' core strategic elements in the terms of new governance theory, thereby advancing academic understanding of real-world practices and practitioner appreciation for what otherwise might seem fairly obscure academic writings. I begin with a reprise of the terms of my mandate.

The Mandate UN efforts to regulate multinational corporations go back to ill-fated Code of Conduct negotiations that started in the mid-1970s and were abandoned a decade later. At the turn of the century, the UN Sub-Commission on the Promotion and Protection of Human Rights, comprising independent experts, began drafting a treaty-like document called "Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights."12 Intended to become binding, it attributed to companies the "obligation to promote, secure the fulfillment of, respect, ensure respect of and protect" human rights. This is essentially the same range of duties that states have accepted for themselves under international treaties that they have ratified, separated only by the elastic concept of their respective spheres of

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influence and the equally fuzzy distinction between primary and secondary duties. The intergovernmental parent body, the Commission on Human Rights, rejected the proposal. But enough governments from various regions believed that the subject of business and human rights required further attention, even if this particular instrument was unacceptable. Facing escalating advocacy campaigns and lawsuits, business itself felt a need for greater clarity regarding its human rights responsibilities. Accordingly, the commission created a "special procedures" mandate in 2005 and asked Secretary-General Kofi Annan to designate the mandate holder. Annan appointed me--to an unpaid position, lacking any independent authority, and initially with no budget or staff.13 To borrow my colleague Joseph Nye's terminology, this was soft power at its softest.14

The mandate evolved in three phases. Neither of the latter two was foreordained; each required approval by the Human Rights Council (which had replaced the Commission on Human Rights by then). The first, from 2005 to 2007, asked me merely to identify such things as existing standards and best practices for states and businesses, and to clarify controversial concepts like "corporate complicity" and "corporate spheres of influence." The council commended the extensive research products that I presented and invited me to take another year to develop recommendations on how best to advance the agenda. I returned in 2008 with only one: for the council to respond favorably to the Protect, Respect and Remedy Framework I proposed, on the premise that the most urgent need was for a conceptual and normative foundation on which future thinking and action could build. The framework rests on three pillars:

1. The state duty to protect against human rights abuses by third parties, including business, through appropriate policies, regulation, and adjudication;

2. An independent corporate responsibility to respect human rights, which means to avoid infringing on the rights of others and address adverse impacts with which companies are involved;

3. The need for greater access by victims to effective remedy, both judicial and nonjudicial.

The framework referenced the International Bill of Human Rights (the Universal Declaration of Human Rights and the two Covenants), coupled with the International Labour Organization's Declaration on Fundamental Principles and Rights at Work, as the authoritative list of internationally recognized rights to be augmented by other instruments (e.g., the Declaration on the Rights of Indigenous Peoples) as warranted by circumstances. The Human Rights Council unanimously welcomed the framework and extended my mandate another three years to operationalize it: to provide concrete and

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practical guidance for its implementation. The GPs do so, comprising thirtyone principles, each with a commentary elaborating its meaning and implications for law, policy, and practice.

Strategic Elements It is impossible here to convey the full range of strategies and tactics--coupled with the many fortuitous developments--that produced the Guiding Principles. My aim below is more modest: to highlight key elements that may help elucidate ways of making new governance work better.

The Old Governance Model If there is one issue on which all new governance scholars agree, it is that the hierarchical old governance model has limited utility in dealing with many of today's most significant global challenges. By this is meant "the idea of negotiating a comprehensive, universal and legally binding treaty that prescribes, in a top-down fashion, generally applicable policies."15 The Kyoto approach to climate change is the most widely cited example. Comprehensive binding arrangements may emerge from longer-term developments, as did the World Trade Organization. But in the near term, new governance theory calls for a building blocks approach that develops different elements of an overall solution "and embeds them within an international political framework."16

That also was my starting point, to the consternation of many human rights groups and some academic human rights lawyers. Human rights discourse is infused with the assumption of a rights-based hierarchy. But there is limited evidence of it in international practice.17 For business and human rights, there was no shared understanding of the problem, let alone any consensus on solutions. Business had vehemently opposed the Norms on the Responsibilities of Transnational Corporations; interests between and among home and host countries of multinationals diverged significantly; and business conduct affecting human rights is powerfully shaped by other bodies of law, including corporate, investment, and trade law, which no government was about to subordinate by treaty obligation to the broad spectrum of internationally recognized rights. Thus, my proximate objective became gaining strong support for a conceptual and normative framework establishing the parameters and perimeters of business and human rights as an international policy domain. International legal instruments, I wrote in 2007, must and will play a role in the continued evolution of the business and human rights agenda, but "as carefully crafted precision tools."18

Polycentric Governance New governance theory rests on the premise that the state by itself cannot do all the heavy lifting required to meet most pressing societal challenges and

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that it therefore needs to engage other actors to leverage its capacities. Hence, the literature emphasizes "responsive regulation," informal cooperation, public-private partnerships, and multistakeholder processes.19 The need is especially acute where regulating the conduct of multinational corporations is involved. With only rare exceptions, companies are subject not to international law, but to the domestic laws of states where they are incorporated and operate. Moreover, the law construes a parent company and each subsidiary as separate legal personalities, so that the parent generally is not liable for wrongs committed by an overseas subsidiary even where it is the sole shareholder. Though the incidence of extraterritorial jurisdiction by home states is increasing modestly, it remains highly contested and cannot, in any event, serve as a general solution to business and human rights challenges. As for international organizations (IOs) stepping in, Kenneth W. Abbott and Duncan Snidal correctly observe that "states have denied virtually all IOs direct access to private targets and strong regulatory authority."20 In short, constructing an authoritative framework for business and human rights inevitably was an exercise in polycentric governance.

Indeed, the building blocks for it were there. At the global level, corporate conduct is shaped by three distinct governance systems: the first is the system of public law and governance, domestic and international; the second is a civil governance system involving stakeholders affected by business enterprises and employing various social compliance mechanisms such as advocacy campaigns and other forms of pressure; the third is corporate governance, which internalizes elements of the other two (unevenly, to be sure). What was required was a new regulatory dynamic under which these governance systems become better aligned in relation to business and human rights; add distinct value; compensate for one another's weaknesses; and play mutually reinforcing roles--out of which cumulative change can evolve. The Protect, Respect and Remedy Framework addresses what should be done to move in this direction; the Guiding Principles show how.

To foster that alignment, the GPs draw on the different--yet when combined, complementary--discourses reflecting the respective social roles that these governance systems play in regulating corporate conduct. Thus, for states the focus is on the legal obligations they have under the international human rights regime to protect human rights abuses by third parties, including business, as well as policy rationales that are consistent with, and supportive of, meeting those obligations. For businesses, beyond compliance with legal obligations that vary across countries in their applicability and enforcement, the GPs focus on the need to manage the risk of involvement in human rights abuses, which requires that companies act with due diligence to avoid infringing on the rights of others and address harm where it does occur. For affected individuals and groups, the GPs stipulate ways for their further empowerment to realize the right to remedy.

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But all of that is conceptual, and conceptual arguments by themselves do not necessarily change minds and practices, no matter how reasonable they may be. Persuasion is much more likely to succeed if it is also experiential. Accordingly, when it came to stipulating how these things should be done, where possible the construction of the GPs was informed by practical engagement with participants from the various stakeholder groups. Illustrative examples include ten companies that conducted feasibility studies of ideas I had suggested for conducting human rights diligence processes and another group of companies that each collaborated independently with local stakeholders in five countries to carry out pilot projects of operational-level grievance mechanisms. A diverse group of states participated in a series of informal retreats using scenario-based exercises to explore the inadequacy of existing legal and policy measures when it comes to ensuring responsible business conduct in conflict zones. Investment agreement negotiators helped shape proposals for better safeguarding human rights within the system of investor protection; human rights organizations and plaintiffs' lawyers advanced ideas for judicial reform. The various strands were brought together in multistakeholder consultations. In short, the GPs do not merely advocate a theory of polycentric governance; in part, they were produced through such means. Of course, this put limits on how much the GPs could strive to achieve at one go. But at the same time, it endowed them with what Joost Pauwelyn, Ramses A. Wessel, and Jan Wouters term "thick stakeholder consensus"--which, they suggest, can be normatively superior in securing compliance to the "thin state consent" validation requirement associated with traditional international law.21 Indeed, in this particular instance, thick stakeholder consensus helped pave the way for unanimous Human Rights Council endorsement.

Orchestration Few scholars have done more than Abbott and Snidal to systematically map patterns of private and multistakeholder initiatives that have moved into the regulatory gap between globally integrated economic forces and actors on the one hand, and fragmented state-based authority structures on the other. But they also note that "the system currently suffers from a significant orchestration deficit."22 The result is "a patchwork of uncoordinated schemes competing vigorously for adherents, resources, legitimacy, and public notice."23 To mitigate this tendency, they recommend that international organizations endeavor to play a greater "orchestration" role: engaging intermediaries and leveraging their combined capacities. Abbott and Snidal differentiate between "directive" and "facilitative" orchestration--directive meaning, for example, orchestration where benefits for firms can be conditioned on adherence to certain standards; and facilitative meaning orchestration through IOs' convening powers, by partnering with companies and NGOs, identifying and disseminating best practices, and other such forms of collaboration.24 The

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Guiding Principles process was well under way when Abbott and Snidal began to publish on the subject of orchestration, yet something closely akin to it was at the heart of the GPs implementation strategy and thus may again provide an illustrative case.

Strong support for the Guiding Principles by the Human Rights Council was the necessary condition for their having a life after the end of my mandate. But by itself, this would not automatically result in other relevant standard-setting bodies, international or national, deferring to the UN and aligning their own standards with the GPs. Different institutions have different missions, reflecting the sectoral, regional, and national concerns represented in them. Nor does the UN human rights machinery have enforcement powers. Therefore, achieving convergence around the GPs required an active engagement effort, which I began right after the council approved of the Protect, Respect and Remedy Framework in 2008. The precise process differed in each case; the main outcomes include the following:

? The new Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises have a human rights chapter drawn virtually verbatim from the Guiding Principles. They are important because they provide for national complaint mechanisms in the forty-two adhering states, which include emerging market countries, regarding the conduct of multinationals operating in or from those states.

? New provisions in the OECD Common Approaches for Export Credit Agencies requiring assessments of social risks, which affect access to capital at the national level.

? The new International Finance Corporation Sustainability Principles and Performance Standards now include human rights language reflecting core concepts of the GPs. They affect companies' access to international capital, amplified manifold because they are tracked by private sector lending institutions party to the so-called Equator Principles, which account for more than three-fourths of all project financing worldwide.

? ISO26000, a new social responsibility guidance adopted by the world's leading private standard-setting body, the International Organization for Standardization (ISO), has a human rights chapter closely shaped by the GPs. ISO energizes a worldwide army of consultants eager to help companies come into compliance and it has considerable uptake in Asia.

? In the European Union, the European Commission endorsed the GPs and asked member states to submit national action plans for their implementation; the United Kingdom was the first to do so. The Commission has also developed additional guidance for several industry sectors and for small- and medium-sized enterprises.

? In the United States, the concept of human rights due diligence, a central component of the corporate responsibility to respect human rights in the

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GPs, wound its way into Section 1502 of the Dodd-Frank Wall Street Reform Act, in relation to conflict minerals procured in Democratic Republic of Congo by US-listed companies.

? The US government referenced the GPs as a benchmark in a new reporting requirement for US entities investing more than $500,000 in Myanmar when it suspended most economic sanctions.

? The Association of Southeast Asian Nations (ASEAN) is exploring ways to align its new business and human rights program with the GPs; the African Union is on a similar though slower track.

Orchestration may be too strong a word to describe these efforts to achieve convergence among standard setters behind the GPs; several were fortuitous and could not have been planned, while others succeeded only in part. But they illustrate the desirability of engaging intermediaries to achieve greater normative and regulatory coherence, larger-scale effects, and more robust outcomes--intermediaries that, in this particular case, have more direct links to and influence over corporate conduct than the UN alone.

Regime Complexes In 2006, the International Law Commission (ILC), in an influential report to the UN General Assembly, documented that a dominant feature of the vast expansion in international legalization has been the fragmentation of international law into specialized and autonomous spheres: between trade and environmental law, for example, and even subsets of both. The ILC concluded that "no homogenous hierarchical meta-system is realistically available" within the international legal order to resolve the problem of incompatible provisions between legal spheres, including when different tribunals that have overlapping jurisdictions address exactly the same set of facts and yet reach different conclusions.25 In other words, legal fragmentation is a structural feature. At best, write two leading legal theorists, more sophisticated legal reasoning can achieve "a weak normative compatibility of the fragments," or "a loose coupling of colliding units."26 The rest has to be worked out in the realm of practice.

Under the rubric of regime complexes, the new governance literature in political science has begun to address a closely related attribute of institutional arrangements. According to Keohane and Victor, "regime complexes are marked by connections between . . . specific and relatively narrow regimes but the absence of an overall architecture or hierarchy that structures the whole set."27 Their example is the many international institutional elements and initiatives that exist in the area of climate change. They observe that "the specific international cooperation problems involved in managing climate change are so varied that a single institutional response is exceptionally difficult to organize and sustain."28 Although it may raise efficiency and

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